“…Policymakers and development practitioners often encourage social capital accumulation among rural households (Gugerty & Kremer, 2000); this is because social capital accumulation is essential to economic development (Durlauf & Fafchamps, 2005; Grootaert & van Bastelaer, 2002; Ishise & Sawada, 2009; Knack & Keefer, 1997; Narayan & Pritchett, 1999; Putnam, Leonardi, & Nanetti, 1993). While Durlauf and Fafchamps (2005) describe how social capital arises from informal forms of organizations based on social networks and associations, empirical quantification of the social capital formation process is still scarce (Calvo, Lavallée, Razafindrakoto, & Roubaud, 2020; Durlauf, 2002; Durlauf & Fafchamps, 2005; Miguel, Gertler, & Levine, 2006). Our findings fill the gap in the literature on social capital by showing that community participation patterns are determined by the costs and benefits of forming risk‐sharing networks.…”